A Commentary on the Passing Scene by
Robert Paul Wolff
rwolff@afroam.umass.edu

Coming Soon:

The following books by Robert Paul Wolff are available on Amazon.com as e-books: KANT'S THEORY OF MENTAL ACTIVITY, THE AUTONOMY OF REASON, UNDERSTANDING MARX, UNDERSTANDING RAWLS, THE POVERTY OF LIBERALISM, A LIFE IN THE ACADEMY, MONEYBAGS MUST BE SO LUCKY, AN INTRODUCTION TO THE USE OF FORMAL METHODS IN POLITICAL PHILOSOPHY.Now Available: Volumes I, II, III, and IV of the Collected Published and Unpublished Papers.

NOW AVAILABLE ON YOUTUBE: LECTURES ON KANT'S CRITIQUE OF PURE REASON. To view the lectures, go to YouTube and search for "Robert Paul Wolff Kant." There they will be.

To contact me about organizing, email me at rpwolff750@gmail.com

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Saturday, August 16, 2014

A MORNING ILL-SPENT

O.K.I have plowed through the book on secular stagnation, and I have some snarky
things to say.I trust no one will make
the mistake of supposing that this is the place to get an unbiased mainstream
account of this collection of essays.For that, I refer you to Krugman's blog.

First things first -- the title and subject
of the book.The term secular stagnation ["secular" of
course meaning long-term, as opposed to cyclical -- not laïc as opposed to
clerical!] was popularized by Alvin Hanson.Here is Wikipedia's summary of his assertion:"In the late 1930s, Hansen argued that "secular stagnation" had
set in, so the American economy would never grow rapidly again because all the
growth ingredients had played out, including technological innovation and
population growth. The only solution, he argued, was constant, large-scale
deficit spending by the federal government.... However, the sustained economic growth
beginning in 1940 undercut Hansen's predictions and his stagnation model was
forgotten."

Well, the boom years are over, and a
number of economists are worried that the world's developed economies have
entered into a period of long-term slow growth and underutilization of labor
and capital that cannot adequately be addressed by the sorts of monetary
adjustments they had come to rely upon.The thirteen essays in the e-book range over the entire world, with
several devoted to the experiences of the European Economic Union and one
focused on Japan's long-term stagnant economy.

Needless to say, I am not going to try to
summarize what I just speed-read.However,
there are two observations I want to make about the mind set and unexamined
presuppositions of the essays, because I think they apply more broadly to
contemporary academic economists.Before
I do that, let me quote two passages from the book that struck me
particularly.The first is unspeakable
[one thinks of Oscar Wilde's famous description of fox-hunting as "the
unspeakable in pursuit of the inedible"], and I confess it does not
surprise me that it can be found in an essay written by a Harvard economist,
Edward Glaeser.Needless to say, he
earned his doctorate at Chicago:

"[I]t is surely necessary to rethink
the structure of the US’s social safety net and to ensure that it does less to
discourage work. David Autor and Mark Duggan (2010) have made an interesting
proposal suggesting that disabled people be allowed to work. The idea of
combining social welfare programmes to eliminate overlapping anti-work incentives
also seems sensible.

The Earned Income Tax Credit represents a
reasonably successful intervention aimed at making work pay. More can be done
in this area. Instead of raising the minimum wage, which risks deterring future
job openings, the wage can be boosted by a federal subsidy. Social security
taxes can be eliminated for workers at the low end of the earnings distribution.
Structural reforms are surely necessary to ensure that the US makes work more
attractive for the jobless."

Has he ever thought to ask whether getting
rid of his tenure and that of other secure professors would get rid of the
stickiness in the academic job market and encourage more out-of-work scholars
to accept work at wages even lower than what they are now forced to accept?Somehow, I doubt it.

The second passage is from an interesting
essay by Richard Koo.I quote it because
I rather like the way his mind works.:

"The point is that it is almost
impossible to maintain fiscal stimulus in a democracy during peacetime. It is
difficult in a democracy because such policies cannot be implemented and
maintained during peacetime unless millions of people are persuaded of the need
for fiscal stimulus. In contrast, in an autocratic state, only one person – the
dictator – needs to be persuaded in order to both administer and maintain
fiscal stimulus.

Adolf Hitler and Franklin Roosevelt were
both elected in 1933 when Germany and the US were in severe balance sheet
recessions. The German unemployment rate reached 28% that year and US rate was
not far behind at 25%. Although both started with fiscal stimulus, Roosevelt,
worried about the criticisms from deficit hawks, reversed course in 1937,
resulting in a serious double-dip recession and the unemployment rate
increasing to nearly 20% again. Hitler, on the other hand, stayed the course
and by 1938, German unemployment had fallen to 2%. [N]othing is worse than a
dictator with a wrong agenda having the right economic policy, especially when
the democracies around him are held hostage to the orthodoxy and remain unable
to adopt correct policies."

Now to my two observations.The first requires that I remind you of the
famous Allegory of the Cave in Plato's Republic.Socrates imagines people chained to the floor
of a cave that is lit only by a fire behind a parapet in front of one
wall.People hidden behind the parapet
walk back and forth between the fire and the wall holding various objects in
their hands.The fire throws grotesque
shadows of the objects high on the face of the wall, which the chained
observers, having no other experience, take to be reality.One man struggles free of his chains and
painfully makes his way through the tunnel that leads out of the cave.There he finds himself in bright sunlight, and
as his eyes adjust to the light, he sees for the first time the real things --
trees, tables and chairs, animals, flowers -- whose shadowy images he has been
watching with his fellows in the cave.When he re-enters the cave to tell his comrades what he has discovered,
he is momentarily blinded by the change in light and stumbles, causing them to
laugh at him as he desperately tries to tell them of the reality awaiting them
in the open air.

That is Plato's metaphor for the relation
between the Realm of Ideas and the sphere of appearances, but I have always
thought of it as a perfect description of modern Macroeconomics.All these really smart, hard-working, serious
scholars are chained to the cave of capitalism, which they quite confidently
believe is the only world there is.They
stare at their statistical time series, trying to outdo one another in guessing
which images will flicker on the wall next.Many are given life-time jobs at great universities for their
efforts.A few are so good at predicting
the flow of images that they win Nobel Prizes for their efforts.But when Karl Marx liberates himself from his
chains, ventures into the sun, and comes back to tell them what he has seen,
they laugh at his stumbles and missteps and dismiss him as an
"autodidact."

My second observation is more in the nature
of a book report.In the entire 163
pages of the thirteen essays I read this morning by some of the world's most
accomplished economists, there was not a single sentence -- not a single word
-- to suggest that the root of secular stagnation is the capitalist organization
of the economy.Nor did any of these
scholars even consider, in passing, the possibility that there might be some other
non-capitalist way of organizing the deployment of the world's capital
resources and labor talents so as to create equitably distributed, sustained
economic growth.Leave aside Edward
Glaeser, who is belongs to the Greg Mankiw school of economic thought.Paul Krugman is a liberal sort of guy, and
even Lawrence Summers, execrable human being though he is, must be considered
to the left of center of the existing American political spectrum.

My God, my socialist grandfather, who never
finished elementary school, knew more about the way the world works than these panjandrums!

About Me

As I observed in one of my books, in politics I am an anarchist, in religion I am an atheist, and in economics I am a Marxist. I am also, rather more importantly, a husband, a father, a grandfather, and a violist.